“The Free Market Mindset:

History, Psychology, and Consequences”

Saturday, March 7, 2009

Tentative Schedule

History:• 9:40 – 10:05: Christine Desan, “Legal Categories of Thought”:
The law categorizes different kinds of liquidity — including coin, banknotes, bonds, dollars, and securities — in rich and various ways. The talk will suggest some of the ways that legal doctrine has disciplined our thought, including our assumptions about money and the way it is made, about public and private, and about free choice in the marketplace.

• 10:10 – 10:35: Bernard Harcourt, “Neoliberal Penality: The Birth of Natural Order, the Illusion of Free Markets”:
In the Encyclopédie in 1758, under the entry “Grains,” Francois Quesnay declared that “It is quite sufficient that the government simply not interfere with industry, suppress the prohibitions and prejudicial constraints on internal commerce and reciprocal external trade, abolish or diminish tolls and transport charges, and extinguish the privileges levied on commerce by the provinces.” Quesnay’s vision of an economic system governed by natural order led to a political theory of “legal despotism” that would stand on its head an earlier understanding of a more seamless relationship between economy and society. By relegating the state to the margins of the market and giving it free rein there and there alone, the idea of natural order facilitated the unrestrained expansion of the penal sphere. It gave birth to our modern form of neoliberal penality. In this presentation, I will trace a genealogy of neoliberal penality and explore the effects it has had in the field of crime and punishment specifically, and in the area of economy and society more generally.

• 10:40 – 11:00: Q&A

11:05 – 12:25: Session 2

Economics:• 11:05 – 11:30: Stephen Marglin, “How Thinking Like an Economist Undermines Community”:
Economics is a two-faced, one might almost say schizophrenic, discipline. It claims to be a science, describing the world, telling it like it is without preconception or value judgment. (Never mind that the hey-day of positivism that enshrines the separation between fact and value is long past; economists have always lived in a time warp.) The reality is that descriptive economics has been shaped by a framework of assumptions, a metaphysics more geared to its normative message than to its descriptive pretensions. This framework is essential to the normative side of an economics that trumpets the virtues of markets and is maintained even when it gets in the way of understanding how the economy really works.
The 19th century physicist, Lord Kelvin, famously proclaimed the virtue of knowledge imbued with the precision of number. Economics goes physics one better, from epistemology to ontology: anything we can’t measure—like community—simply doesn’t exist. If your model of the world is inhabited by self-interested individuals rationally calculating how to consume ever more, for whom society is the nation-state, community is not going to show up on your radar. It goes without saying that economic hardship, especially the kind caused by unemployment and short hours, will make community more necessary and more visible; people will have to rely on each other more and more as the market fails them. It remains to be seen what impact this dose of reality will have on economics.

• 11:35 – 12:00: Juliet Schor, “Colossal Failure: The Output Bias of Market Economies”:
Mainstream economic theory claims that a competitive market equilibrium delivers optimal levels of consumption and well-being. The reasoning relies on a number of invalid assumptions, including the crucial premise that individuals’ preference structures are independent. If consumption is social, as considerable social science research shows, then the market delivers excessive levels of consumption, too many hours of work, and too much ecological degradation. (This is in addition to the well-known argument that ecological goods are externalities.) In this talk I discuss the implications of what has become a profound market failure, and how we can rectify it.

Psychology:• 1:35 – 2:00: Sheena Iyengar, “The Multiple Choice Problem”:
It is a common supposition in modern society that the more choices, the better—that the human ability to manage, and the human desire for, choice is infinite. From classic economic theories of free enterprise, to mundane marketing practices that provide customers with entire aisles devoted to potato chips or soft drinks, to highly consequential life decisions in which people contemplate multiple options for medical treatment or investment opportunities for retirement, this belief pervades our institutions, norms, and customs. In this era of abundant choice, there are several dilemmas that people face: How do you choose given the sheer number of domains in which you now have the ability to choose? And in any given domain, what are the ramifications of being confronted with more options than ever before? In this talk, I will describe decisions we need to make that vary in significance from jams at a supermarket to life-or-death situations, looking at how the exercise of choosing and the availability of numerous options affect decision quality and happiness with the decision outcome.

• 2:05 – 2:30: Nicole Stephens, “Choice, Social Class, and Agency”:
Across disciplines we tend to assume that choice is a fundamental or “basic” unit of human behavior, and that behavior is a product of individual choice. In my talk, I will present a series of lab and field studies that question these assumptions about behavior, and suggest that these assumptions reflect primarily the experiences of college-educated, or middle-class, Americans, who tend to have access to a wealth of choices and an array of quality options among which to choose. I will discuss the implications of these assumptions for the (mis)understanding of behavior across diverse contexts.

• 2:35 – 3:00: Jaime Napier, “The Palliative Function of Ideology”:
In this research, we drew on system-justification theory and the notion that conservative ideology serves a palliative function to explain why conservatives are happier than liberals. Specifically, in three studies using nationally representative data from the United States and nine additional countries, we found that right-wing (vs. left-wing) orientation is indeed associated with greater subjective well-being and that the relation between political orientation and subjective well-being is mediated by the rationalization of inequality. In our third study, we found that increasing economic inequality (as measured by the Gini index) from 1974 to 2004 has exacerbated the happiness gap between liberals and conservatives, apparently because conservatives (more than liberals) possess an ideological buffer against the negative hedonic effects of economic inequality.

• 3:05 – 3:30: Barry Schwartz, “Addicted to Incentives: How the Ideology of Self Interest Can Be Self-Fulfilling”:
“If you want someone to do something, you have to make it worth their while.” This uncontroversial statement is the watchword of our time. It is the core assumption of economics and of rational choice theory. It is the linchpin of free market ideology. And it explains why the first place we look in matters of public policy—from regulating financial markets to improving the quality of education to reducing the high costs of health care—is to the incentive system that governs the behavior of current practitioners. Uncontroversial. Self-evident. And false. In this talk, I will argue that the reductive appeal to self-interest as the master human motive is a false description of human nature. At the same time, it can become a true description if people live in a world in which incentives are presumed to explain everything and are used to produce the behavior we want. Just as people can become addicted to heroin, they can become addicted to incentives. Looking at modern American society as it is gives us a picture of what people can be, but not of what they must be.

• 3:35 – 3:50: Q&A

3:55 – 4:10: Coffee Break4:15 – 5:55: Session 4

Law & Policy:
• 4:15 – 4:40: Douglas Kysar, “The Point of Precaution: Economics and the Forgetting of Environmental Law”:
By now, the story of modern American environmental law has been redacted into a familiar script, one in which the excesses of our early attempts to regulate the human impact on the environment came to be disciplined by the insights of sound science and economic reasoning, warding off in the process alarmism, inefficiency, and government overreaching. However useful this script may once have been, it now actively impedes efforts to understand and improve our environmental performance. Its logic and conclusions have begun to appear so powerful that we have lost sight of a great deal of practical and moral wisdom that remains alive within our early, “excessive” efforts to conserve natural resources, reduce pollution, save species, and enhance human health and safety. Soon enough, the language of instrumentalism that animates our talk of tradeoffs, efficiency, and welfare maximization will become so dominant that we will lose facility altogether with these alternative and once resonant languages. We will forget that we once talked of environmental rights, rather than of optimal risk tradeoffs; of the grave challenges posed by uncertainty regarding potentially disastrous or irreversible consequences of human action, rather than of risk aversion and the option value of delay; of the stewardship obligations we incur on behalf of future generations, rather than of discounted welfare maximization; and of the responsibility we hold to lead international cooperative endeavors to protect the global biosphere, rather than of competitiveness concerns arising from regulatory differentiation within the world economy. In short, we will forget the richly contoured and sometimes convoluted, but always essential moral and political landscape that lends meaning to those aspects of our environmental laws that appear nonsensical from the perspective of economic theory.
• 4:45 – 5:10: Jon Hanson, “Regulation Reactance”
According to folk wisdom, “absence makes the heart grow fonder,” and people tend to “want what they cannot have.” Some decades ago, social psychologists identified a related tendency they named “reactance”: the negative response to threats to, or constraints on, perceived freedoms. Although many have identifiied the significant role played by reactance in the marketing of products, few have noticed its equally influential role in the promotion of policies and policy ideologies. I’ll review several kinds of support for that claim and explain how the success of the free market mindset reflects “regulation reactance” (among other situational forces).
• 5:15 – 5:30: Q&A
• 5:30 – 5:55: Large Panel Discussion – Presenters and Conference Attendees

2 Responses to “Conference – The Free Market Mindset”

Monetary self-interest is a simplifying assumption economists make, not something they actually believe. I mean, not even economists are dumb enough to believe this is the case in real life.

So when I read descriptions of papers like Marglin’s and Schwartz’s above, I’m kind of puzzled.

Why don’t social scientists ever critique physicists for assuming that objects are volumeless masses in simple calculations? That kind of view could have disastrous effects, if it spread to intellectually vulnerable children.

And why aren’t economists criticized for assuming perfect information? If they consistently use this assumption, won’t they be risking delusions of omnipotence?

The only explanation I can think of is that these criticisms are the result of some kind of motivated reasoning. Perhaps we should be less worried about the free market mindset and more worried about the anti-market mindset.

[…] Sciences of Harvard Law School will be hosting its third annual conference. The topic is “The Free Market Mindset: History, Psychology, and Consequences.” Given all that is going on in today’s economy and the government’s efforts to […]